September 2023: Business incentives & Cybersecurity threats

Legislating the ‘objective’ of super

The proposed objective of superannuation released in recently released draft legislation is: ‘to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way.’

The significance of legislating the objective of super is that any future legislated changes to the superannuation system must be in line with this objective. It’s a fairly broad definition. For example, “equitable” seeks to address the distributional impact of superannuation policy. That is, latitude for the Government to target tax concessions to address differences in demographic factors and structural inequities including intergenerational inequity and outcomes for different groups including women, First Nations Australians, vulnerable members and low-income earners.

“Sustainable” encapsulates the changing needs of an ageing population including reducing the reliance on the Age Pension. The draft also alludes to the viability of the cost of tax concessions used to incentivise Australians to save for retirement.

“Deliver income” appears to reinforce the concept that superannuation savings “should be drawn down to provide individuals with a source of income during their retirement.”

More than 15 million Australians now have a superannuation account. Australia’s superannuation pool has grown from around $148 billion in 1992 to $3.5 trillion in 2023, and will continue to grow. Total superannuation balances as a proportion of GDP are projected to almost double from 116% in 2022–23 to around 218% of GDP by 2062-63.

The consultation also recognises the value of the superannuation system as a source of capital, “which can support investment in capacity-building areas of the economy where there is alignment between the best financial interests of members and national economic priorities.”

Business Obligation in the New Financial Year

Single Touch Payroll (STP) finalisation
Employee STP data needs to have already been finalised, as the due date for this data was 14 July. This information is used to complete their tax returns. If you have both closely held payees and arm’s length employees, your finalisation declaration for your closely held payees is due by 30 September each year. If you can’t make a finalisation declaration on or before the due date, you must apply for a deferral.

You must lodge a fi nalisation declaration for all employees you’ve paid and reported through STP during the financial year. This includes those employees who may have only worked for part of the financial year, for instance, terminated employees and casuals.

PAYG withholding
You must lodge a PAYG withholding annual report for all payments not reported and finalised through STP.

Tax tables
Use the PAYG withholding tax tables or tax withheld calculator when determining how much to withhold from your payments to your employees or other payees in the new financial year.

Super guarentee (SG) rate
The SG rate has increased from 10.5% to 11% from 1 July 2023. Ensure your payroll and accounting systems are updated to include this.

Taxable payments annual report
Businesses and Government entities who pay contractors may be required to report these payments and lodge a taxable payments annual report by (TPAR) by 28 August 2023. Contractors can include subcontractors, consultants and independent contractors. They can operate as sole traders (individuals), companies, partnerships or trusts. TPAR is applicable to builders, cleaning contractors, and IT consultants, among other industries, and the list is growing every year.

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Common threats to your Business’ Cybersecurity

For businesses of any size (small, medium, or large), the risk posed by poor cybersecurity policies could cost them considerably.

In the event of a cybersecurity incident, the long-term costs and consequences of such an incident can range from months to years and include significant expenses that companies are unaware of or do not anticipate in their planning.

These costs can include lost data, business disruption, revenue losses from system downtime, notification costs, or even damage to a brand’s reputation.
There are many simple and inexpensive measures businesses can use to improve their security and prevent these issues from occurring.

Scam Messages/Phishing
Scams are a common way that cybercriminals target small businesses.
Their goal is to scam you or your staff into sending money or gift cards, clicking on malicious links or attachments, or giving away sensitive information, such as passwords.

Email attacks
A common email attack against small businesses is
a business email compromise (BEC). Through this, criminals can impersonate business representatives by using compromised email accounts, or through other means (such as using a domain name that looks similar to a real business’s one). The goal of these attacks is to scam victims into sending funds to a bank account operated by the scammer.

Malware (Malicious Software)
Malware is a blanket term for malicious software designed to cause harm, such as ransomware, viruses, spyware and trojans. Malware can steal or lock the
fi les on your device steal your bank or credit card numbers steal your usernames and passwords take control of or spy on your computer.

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Simplifying individual tax residency: Government consultation

Movement may be afoot on the complex issue of individual tax residency in Australia. In 2019, the
Board of Taxation released a report which contained a proposed model for modernising individual residency. The new framework was designed to simplify the tax system and reduce compliance costs for individuals and employers.

The model proposed uses a two-step approach of primary tests and secondary tests. Apart from the government official test, which would replace the Commonwealth superannuation test, the main primary “bright line” test will be the 183-day test, in which a person who is physically present in Australia for 183 days or more in any income year would be considered an Australian tax resident.

One of the secondary tests proposed would require an individual to be physically present in Australia for a minimum of 45 days in an income year before commencing residency, or a maximum of 45 days in an income year before ceasing residency. However, due to various global factors (eg the COVID-19 pandemic), the government is seeking views on whether this 45-day threshold is still appropriate and whether there are any circumstances where days spent in Australia should be disregarded for this threshold.

In addition to the 45-day threshold, the proposed secondary test includes the factor test, which focuses on four specific types of connection an individual may have to Australia. Any individual whose circumstances meet any of the four factors will be deemed to have a stronger connection to Australian than someone who does not.

The Federal Government is now soliciting public feedback on the proposed model before making a decision about whether to proceed with the changes.

Small Business Energy Incentive

The Federal Government has released plans to introduce a small business energy incentive to help small and medium businesses electrify and save on their energy bills. The proposal was in the consultation stage until late July, but once implemented it may see businesses with an aggregated annual turnover of less than $50 million gain access to a bonus 20% tax deduction for the cost of eligible depreciating assets that support electrification and more efficient use of energy. It is projected to apply for the 2023–2024 income year.

Eligible depreciating assets would include any asset that:

  • uses electricity and there is a new reasonably comparable asset that uses a fossil fuel available in the market
  • uses electricity and is more energy efficient than the asset it is replacing or, if not a replacement, a new reasonably comparable asset available in the market.
  • is an energy storage, demand management, or efficiency-improving asset

In order to claim the bonus deduction, the business must make the expenditure for a taxable purpose; therefore, costs will need to be apportioned if the asset has a mix of private and business use.

If both the small business and the asset meet eligibility requirements, the amount of bonus deduction is 20% of the total eligible cost, up to a maximum of $20,000 across the bonus period.

Retirees aren’t hoarding funds

The government is currently engaged in a narrative that points to Australians being very frugal when it comes to spending their superannuation, but an industry professional says that “the facts are very different on the ground”.

Speaking at an Australia-Israel Chamber of Commerce event last week, Deanne Stewart, chief executive officer at Aware Super, said the facts suggest that the fear of outliving our super is real and for a good reason.

While the latest intergenerational report revealed that total assets in the superannuation system are expected to continue to grow strongly over the next four decades, the government is expressing concerns over a noticeable reluctance among Australians to tap into their retirement savings.

But according to Ms Stewart “more than 80 per cent of those that are 80 or above do not have any super in their last four years”.

In fact, ATO data that reflects on the years between 2014 and 2018 revealed that 80 percent of people aged 60 and over who died in that period had no super at all four years before their death. For those aged 80 and over, 90 percent had no super in the four-year period before their death.

In July, the RIC review involving 15 super trustees responsible for 16 industry, retail, corporate, and public sector funds found that although there have been improvements in retirement assistance offerings since the RIC’s enactment in the previous July, there remain variabilities in the quality of approaches taken by the scrutinised funds.

APRA and ASIC said that while super trustees utilised a range of data sources to understand the financial position and retirement income needs of members, all exhibited gaps in the critical information required to inform the development of an effective retirement income strategy.

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